While many parts of the globe are still mired in Covid misery, U.S. consumers and the country’s fashion sector are showing signs of a turnaround.
In fact, the present moment “appears to be a major inflection point for U.S. retail,” according to Deborah Weinswig, CEO and founder of Coresight Research, who said the decline in confirmed coronavirus cases has resulted in a continued pickup in sales.
Consumer confidence rising
The Centers for Disease Control and Prevention says approximately 100 million people in the U.S. have received at least one shot of a coronavirus vaccine. This robust vaccination effort has also likely contributed to consumer confidence, Weinswig said, with the firm’s data showing a year-over-year retail sales increase of more than 7 percent in February, after about eight months of already accelerating demand.
Coresight’s recent consumer surveys have also shown an uptick in the purchases of discretionary products. Since Feb. 1, the proportion of consumers reporting buying more clothes than they did prior to the start of the pandemic has nearly doubled, from more than 5 percent to a little over 10 percent.
“Consumers look increasingly ready to get back out and about, including shopping in stores,” Weinswig told Sourcing Journal, adding that foot traffic in New York City—as measured by Apple Maps data—has returned to nearly 80 percent of pre-pandemic levels after hovering around just 55 percent as recently as early February.
In just one month, consumers have gotten “more adventurous,” she said, noting that from Feb. 8 through March 22, “the proportion of consumers reporting arranging a vacation in our weekly survey has nearly doubled, and the proportion of consumers avoiding public places has dropped.”
Holiday spending picks up
The growing confidence in safety and the economy is also evidenced in Coresight’s survey of consumers showing prospective spending on recent and upcoming holidays. While retail spending on St. Patrick’s Day this month saw a more than $1 billion drop year-over-year, from $6.2 billion to $5.1 billion, Weinswig noted that the 2020 holiday snuck under the wire of many lockdown orders.
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That phenomenon is even better illustrated when examining Valentine’s Day sales year over year. While shoppers spent $27.4 billion in 2020—up about $7 billion from the year prior—that number dropped to $21.8 billion in 2021. The fall in sales appears steep, but this year’s figure still bests 2019’s Valentine’s Day sales, likely due to a pent-up demand to indulge in pick-me-ups and the reopening, in markets like New York City, of indoor dining. 2020’s Valentine’s holiday also took place well before quarantine, when shoppers were undeterred from spending freely or dining out.
Easter appears to remain more consistent year over year, with 2020 seeing $21.7 billion in retail sales and this Sunday’s holiday projected to see spending reach $21.6 billion. Coresight’s insights show that while one-third of shoppers plan to spend less this year on Easter treats, an equal proportion plans to keep purchases on par with last year. About 10 percent plan to spend more. According to Weinswig, the rapidly changing Covid landscape has likely “made consumers more optimistic” than they felt even one month ago.
Economic factors still significant
While retail sales are trending upward, discretionary spending will likely remain “split along income lines” for the foreseeable future. “Unemployment remains high, particularly among lower-income consumers,” Weinswig said, adding that as recently as January, the Federal Reserve pegged the unemployment rate among the lowest quartile of earners at 20 percent. Those who are struggling to make ends meet “will be reluctant to spend big on discretionary purchases,” Weinswig noted, and this has been evidenced by the rise of dollar and discount stores in 2021. “Discount stores account for more than half of all store openings tracked by Coresight Research in 2021 to date,” she said.
Conversely, high-income earners have benefited from a strong housing and stock market, she said, and are likely to part with their dollars more readily after seeing high savings rates throughout the pandemic. “Home prices have risen every month of the pandemic despite the crisis,” she added.
Shifts in behavior could stick
Shoppers rapidly redirected discretionary funds towards purchasing goods, rather than services, throughout the pandemic, Weinswig added. While they initially panic-bought household essentials, they then turned their attentions to fashion purchases like loungewear and Zoom-ready apparel, fueling retail’s recovery even as they remained homebound.
“Though we have seen some increases in capacity restrictions for restaurants and approval of future outdoor sporting events, these occurrences are few and far between, and this trend is likely to reverse slowly,” Weinswig said, indicating that goods—not services or experiences—will still be the primary spending outlet for the third round of stimulus payments.
Coresight’s data showed that about half of consumers plan to “retain a changed way of living in the long run” once the crisis has finally run its course, Weinswig said. “While that’s still quite high, it’s down from a peak of about two-thirds in June,” she added, showing that consumer attitudes are changeable, contingent upon conditions like safety.
“The behavior consumers are most likely to retain is shopping more online and less in stores,” she added. More than two-fifths (23 percent) of consumers plan to continue to make purchases online once the pandemic ends, she said. Meanwhile, a similar number (21 percent) plans to visit public places, like retail, with less frequency.